A Guide to Investing in Graphene Stocks
You’ll often hear us use the term “trying to find the next Microsoft” which refers to investors who are looking for that one exciting get-rich-quick stock as opposed to doing it the slow and boring way with multiple stocks. Warren Buffet didn’t accumulate his wealth investing in exciting stocks, it’s the boring old dividend growth stocks that will make you wealthy. Still, we always find people gravitating towards the big exciting stories – like graphene.
Over the years, we’ve written around 30 articles looking at graphene companies across the globe. Today, we’re going to summarize all these pieces into a single guide to investing in graphene based on what we learned researching the topic over the past seven years.
What is Graphene?
In 2004, two scientists from the University of Manchester, Andre Geim and Konstantin Novoselov, discovered a novel carbon-based nanoparticle called graphene for which they received the Nobel Prize for Physics in 2010. In order to produce graphene, you start with graphite, and then peel off a single layer of carbon atoms.
The inventors of graphene actually placed adhesive tape over graphite to peel off layers of graphene, but the process is more complicated than that if you wish to produce a uniform product.
Once you have produced graphene, you then have a material with some remarkable properties:
- Strength: If you had a layer of graphene as thick as saran wrap, it would take a full-grown elephant standing on a pencil to puncture the layer.
- Current Density: Graphene can carry more electricity, more efficiently, faster and with more precision than any other material.
- Hardness: Graphene is harder than a diamond
- Flexibility: Graphene can be stretched by up to 20% without incurring any damage
- Impermeable: Graphene is the most impermeable material ever discovered. Even helium atoms cannot squeeze through it.
- Thermal conductivity: Graphene is better at conducting heat than any other known material
- Weight: Graphene is the thinnest and lightest material in existence
Around 2013, investors started to become aware of the potential for graphene and everyone seemed to conclude that investing in graphene was the way forward. One way some people claimed we could invest in graphene was through graphite mining.
Investing in Graphene Through Graphite Mining
Over the years we have seen a proliferation of graphite mining companies that claim they’re going to become vertically integrated graphene producers. Our first article on this topic involved two companies – Lomiko Metals and Graphene 3d Labs. Lomiko’s share price enjoyed a +170% increase when they announced their intent to supply graphene for “graphite 3D printing” to Graphene 3D Labs. The management teams at these two companies strongly disagreed with us when we said Graphite Miners are Not a Play on Graphene, and openly challenged us for months. Maybe that time would have been better spent developing their businesses. Today, Lomiko Metals has a market cap of less than $2.5 million. Graphene 3D Labs didn’t fare much better. After a name change to G6 Materials Corp, their market cap sits at around $5.25 million. If you bought shares in this piece of crap (that’s a technical term we like to use to describe a company that just raises money based on promises and never accomplishes anything) when it began trading in the United States, you would have lost -96% of your investment – so far.
Other graphite-miners-cum-graphene-producers that blew up spectacularly include American Graphite Technologies stock and Focus Graphite Stock which have lost -93% and -87% respectively since we warned our readers about them. Those investments probably fared better than anyone who purchased shares in Next Graphite, a company that went from selling jewelry to producing graphene. That’s almost as bad as going from selling palm oil to manufacturing graphene.
Another interesting case is Mason Graphite, a publicly traded graphite junior mining company, that funded a graphene startup called NanoXplore. From our article four years ago:
NanoXplore is a graphene producer like many we have covered before. As of February this year, their graphene production facility was in full operation with a capacity of 3 metric tons per year. NanoXplore claims that this is the largest graphene production capacity in Canada and, outside of China, one of the 5 largest in the world.Credit: Nanalyze
In 2019, Mason Graphite sold their interest in NanoXplore for around $28 million. Now, NanoXplore trades as an over-the-counter stock with miniscule revenues. As we’ve told our readers time and again, avoid all OTC stocks – also called penny stocks – like the plague that they are.
Update 6/3/2022: We since wrote a profile piece about NanoXplore which now trades on the Toronto Stock exchange. Still, we wouldn’t touch this firm because their business model is opaque, they appear to be acquiring manufacturing firms that aren’t growing, they seem to be promoted, and we can’t see how shares provide us with exposure to graphene.
We can assume that you need a source of quality graphite to produce quality graphene, but the real value is in producing a graphene product that you can commercialize. Ever since the first graphene product was commercialized – a graphene ink from Vorbeck – graphene producers can’t seem to find a way to create value other than producing some over-priced bike wheels or crowdfunded supercapacitors for smartphones. If we can’t manage to commercialize any graphene-enabled products at scale, then the entire investing thesis breaks down, which kind of explains where we’re at today with graphene.
Investing in Graphene Producers
The First Graphene Stock to IPO
The first proper graphene company to have an IPO (initial public offering) was Applied Graphene Materials (AGM:LN) which has done nothing but crash and burn ever since then. The reason for this is a problem that afflicts graphene producers in general – an inability to generate revenues:
Less than two months after AGM first offered their shares to the public, their market cap breached $100 million as investors bid shares up nearly +80% on hype alone. If those same investors still held their shares today, they’d have lost -90% of their value as AGM’s market cap sits at around $10 million today. We continue to ask the same questions we did back then. Where are the revenues?
Lots of Graphene Producers, Little Revenues
In 2017, four years had passed since the days of graphene hype so we did an update on graphene stocks and then again we updated our readers on graphene stocks in 2019, two years later. That article was aptly titled The Long Road to Graphene Commercialization, and here are the stocks we covered:
- Applied Graphene Materials – Still, no meaningful revenues. Losses are trending in the wrong direction.
- Directa Plus – Targeting environmental applications and textiles. Making some traction with 2019 revenue at around $3 million.
- Haydale Graphene Industries – This company’s share price has been decimated giving them a present-day market cap of under $6 million. They can’t grow revenues, but they sure can grow losses.
- Versarien PLC – Yearly revenues were headed in the right direction until growth stalled in 2019. Volatile shares and lots of investor interest in this company which may show the most promise out of all graphene producers we’ve looked at. Why? One word. Revenues.
Throughout the years, we’ve also looked at other graphene producers that aren’t publicly traded. These include:
- Xolve – Last funding round raised in 2015 with some decent investors backing them. No news from the company (per the news release section of their site) since 2013. Said to be operating in stealth mode.
- Perpetuus – Welsh company working on adding graphene to bike tires. Large production capabilities, but everyone is producing graphene these days. Can they move beyond niche sporting applications? Last year they partnered with our next company.
- XG Sciences – The last press release on their website talks about some graphene hockey sticks. Again with the niche sporting applications? How about some revenue growth that looks like a hockey stick, not like this:
- Angstron Materials – Last disclosed funding round in 2016. Claims to have largest global production capacity and the first graphene patent with the most graphene-related intellectual property (426 patents).
Selling bulk graphene doesn’t appear to be the way forward. Creating graphene products to target large markets like energy storage or composites is where we might see the sort of exponential growth investors want to see with disruptive nanomaterials like graphene.
Graphene Stocks vs. Graphite Stocks
Something else we noticed when graphene was being hyped were publicly traded companies that dealt with graphite starting to slip in mentions of graphene in their investment decks. Wall Street pundits didn’t help, as many times it was the analysts who made the suggestion that because they worked in graphite, they could also be considered a play on graphene.
In 2015, someone on Seeking Alpha posted a piece titled “Aixtron Is The Top Stock In The Graphene Industry.” We responded with a piece that describes why Aixtron is Not a Graphene Stock just because they sell chemical vapor deposition (CVD) equipment. The same holds true for CVD Equipment Corporation.
Another company mentioned by many as a possible pure-play in graphene was GrafTech (NYSE:GTI), one of the world’s leading manufacturers of carbon and graphite products. We talked about why GrafTech is not a graphene stock. At least they never sold out by plastering the word graphene all over their investor decks like others did.
Your Graphene Company Goes Here
As a result of publishing this guide, we’re likely to hear from companies that produce graphite or graphene or whatever it is they claim to do that relates to the “investing in graphene” thesis. One such company hit us up a few weeks ago, asking us if we knew of them. We said we did. They then said “what do you need from us?” as if we’re going to subject our readers to yet another “we used to mine graphite and now we’re going to commercialize graphene” investment thesis.
If you’re a company that’s involved in graphene, you need to show investors the money. That means you need to have meaningful revenues and consistent quarterly revenue growth tied to the sale of commercial products or services that relate to graphene. Investors are tired of promises. Yes, we know that once you start showing strong revenue growth, your shares will be priced at a premium. We’re fine with that. What we’ve grown tired of are companies with weak share prices that continue to over-promise and under-deliver.
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